Tag Archives: Social Security

Roundup Day

Cattle Roundup** Still not convinced the Republican Party has shifted into the progeny of the 19th century “Native American Party?”  Yet another example of the Know-Nothing-ism comes to us from Minden, NV and Republican Assemblyman Jim Wheeler.  The bottom line:  “There are transcendent moral laws that cannot be changed by public opinion, and to fail to stand for these is to descend into moral idiocy and cowardice that makes a person unworthy of representing anyone.”  Go Here for the background, and video.  Wheeler’s feeble response here.

** Vegas Jessie takes a look at one particularly virulent form of ultra-conservatism, the Dominionists among the Republican ranks.

** And, the Ultra’s are heading in the same old direction they’ve been taking since 1935 — straight for Social Security.  Blue Lyon has thoughts on the matter worth a click and read.

** One of these days we’ll need to discuss why it is that rape isn’t universally condemned as a c-r-i-m-e.  The Sin City Siren speaks to the issue.

** The Nevada Progressive observes the devolution of the GOP position on comprehensive immigration reform in the form of Senator Marco Rubio’s latest attempt to placate the Know Nothings, and wonders just where Congressman Joe Heck (R-NV3) might be on the issue now.

** Speaking of comprehensive immigration reform.  On June 27, 2013 at 4:11 pm Eastern, the Senate passed S. 744, a comprehensive immigration policy reform bill.  Absolutely nothing has happened in the Beyond Do Nothing House of Representatives about this bill.  If the House were inclined to take up the issue there’s H.R. 15 available for their perusal.  What do we hear from the House of No? Nothing.

** There seem to be just about as many glitches in the discussion of the Affordable Care Act as there are in the web site, this post neatly takes down one of the newer GOP complaints. Recommended reading.   To which Perrspectives comments upon the CBS news warning that the ACA Medicaid enrollment is proceeding as planned.  Think Progress takes on the “sticker shock” issue.

** Feeling philosophical? There’s food for thought from Demos on the survival of the Social Darwinists in America. Also recommended reading.

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Filed under Health Care, Nativism, Nevada politics, Politics, Republicans

Are We Serious About Discussing The National Debt?

OK, let’s talk about the debt and the deficit — but let’s have a serious, adult, conversation.  Here are some suggested rules for this road:

We need to talk about our national debt as a fiscal policy matter, not as a political propaganda talking point.

#1. One of the crucial points we need to acknowledge is that we were involved in two very expensive wars between 2000 and 2013.  We racked up some significant debt during military operations in Afghanistan and Iraq.   The military endeavors in Afghanistan have been, and continue to be, exceedingly expensive:

“The fact remains, however, that if the CRS and OMB figures for FY2001-FY2013 that follow are totaled for all direct spending on the war, they reach $641.7 billion, of which $198.2 billion – or over 30% – will be spent in FY2012 and FY2013. This is an incredible amount of money to have spent with so few controls, so few plans, so little auditing, and almost no credible measures of effectiveness.” [CSIS]

The removal of American forces from Afghanistan will curtail future expenditures, but the debt remains.  Whether we like it or not, we have to pay for both the direct expenditures for military operations, and we have to allocate funds for indirect costs which we may reasonably expect to incur.  There will be Veteran’s benefits to distribute, survivors’ benefits, and other VA services.

Although we are no longer a significant military presence in Iraq, the debt for our military actions and “reconstruction” is still on the books.  As of March 2013, the Iraq war cost $1.7 trillion which should be added to another $490 billion in benefits owed to Iraq War Veterans. [Reuters]

However convenient it may be to run on about “out of control” and “rampant” spending — it is absolutely necessary to be honest about the major elements included in the total indebtedness — and we cannot honestly discuss our national debt without acknowledging its major components, such as the wars in Afghanistan and Iraq.

At some point the national discussion must answer the question: How do we pay down what we owe for these wars without jeopardizing the promises we made to the men and women we sent to fight in them?

Secondly, we need to address the issue raised in the CSIS report, i.e. how we account for and administer our military expenditures?  There have been several attempts to improve Pentagon auditing, but the situation remains alarming.  The Defense Contract Auditing Agency, which is supposed to prevent over-payments, fraud, and abuse is in disarray.

The DCAA has a budget of $573 million, and a backlog of 24,000 audits.  This means that at the rate it is operating it cannot clear its backlog until 2016.  [BusinessIns] Note, it isn’t that the Pentagon doesn’t want to audit its contracts, it is that with current personnel and resources — it can’t.   Audits in 2011 (the last year for which figures are available) the DCAA recouped about 9% of the $128 billion in costs  it audited.   If we apply the 9% rate to the current backlog of $574 billion we could expect to recoup some $54 billion. [BusinessIns]

Therefore, another question we need to raise when discussing “waste, fraud, and abuse” in a significant portion of our national expenditures is:  Have we allocated the resources necessary to perform the audits imperative to the reduction of wastefulness?  It makes precious little sense to argue for either a reduction or increase in allocations to the Department of Defense unless we are willing to provide the necessary fiscal oversight of those allocations.

#2.  There needs to be an agreement as to what does and does not contribute to national indebtedness, especially in terms of earned benefit programs.

First, while we may argue about the philosophy underpinning the Social Security program, there is no argument about how it is funded.   The Social Security Administration explains why some have been confused about the “debts owed to the SSA”:

Most likely this question comes from a confusion between the financing of the Social Security program and the way the Social Security Trust Fund is treated in federal budget accounting. Starting in 1969 (due to action by the Johnson Administration in 1968) the transactions to the Trust Fund were included in what is known as the “unified budget.” This means that every function of the federal government is included in a single budget. This is sometimes described by saying that the Social Security Trust Funds are “on-budget.” This budget treatment of the Social Security Trust Fund continued until 1990 when the Trust Funds were again taken “off-budget.” This means only that they are shown as a separate account in the federal budget. But whether the Trust Funds are “on-budget” or “off-budget” is primarily a question of accounting practices–it has no effect on the actual operations of the Trust Fund itself.  [SSA] (emphasis added)

From 1984 onward the Social Security Administration was empowered to hold special issue securities which are non-public securities, not available on the commercial market, that can be redeemed as the SSA determines it needs in order to make its revenues meet the amount of benefits to be paid.  In short, it was the Reagan Administration’s intent that there be a “savings account for the trust funds” to address the retirement of the Baby-Boomers, and the increased number of beneficiaries who would be eligible for benefits.

While it might be advisable to decrease the need for the Social Security Administration to dip into its Special Issue reserves, it cannot be rationally argued that the SSA contributes in any significant way to the national debt.

There are alternatives to decreasing benefits, the most common being an increase in the earnings cap.  The current contribution and benefit base is set at $113,700 meaning that all income above that level is not subject to taxation.  [SSA]

“Currently, earned income in excess of $113,700 is entirely exempt from the 6.2 percent payroll tax that funds Social Security benefits (employers pay a matching 6.2 percent). 5.2 percent of working Americans make more than $113,700 a year.” [NYT] (emphasis added)

When the Congressional Budget Office released its report on Social Security in July 2010 (pdf) altogether too many focused on the problems sections and insufficient attention was paid to the options the report presented.  There was, for example, Option 6, removing the cap:

Under this option, Social Security’s total revenues would increase by about 0.9 percentage points of GDP in 2040, or by about 18 percent relative to current law. This option would improve the 75 year actuarial balance by 0.9 percentage points of GDP and would extend the trust fund exhaustion date beyond the 75 year projection period. As a result, payable benefits would be higher from 2039 onward, especially for people born later. This option would primarily affect taxes paid by high earners. (emphasis added)

When we discuss options regarding the “reform” of earned benefits (“entitlements” if you will) ALL the options should be on the table — including the removal of the regressive cap on income subject to the Social Security taxes.   [See also NYT]

There’s nothing intrinsically wrong with discussing “entitlement reform” as part of future budget and funding planning.  However, there is something very wrong about assuming that all such ‘reform’ be borne by the 95% of the U.S. population who are to accept reduced benefits,  for the benefit of the top 5% of income earners.  A person earning an adjusted income of $1,000,000 annually isn’t paying any Social Security tax on $886,300 of his or her income; the equivalent of 16 people who earn the U.S. median wage of $54,000.

Those wishing a fuller account of the elite assault on earned benefits should read, or review, Thomas B. Edsall’s excellent commentary in “The War on Entitlements,” NYT, March 6, 2013.

#3. We need to factor in the impact of the recession.   There’s really no way around this:

“Including all the stimulus spending, tax cuts, bank bailouts and automatic stabilizers, the Great Recession will add about $4.2 trillion to the federal deficit by the time the economy has fully recovered in 2016, based on back-of-the envelope calculations using figures from the Congressional Budget Office and the congressional Joint Tax Committee.”  [MarketWatch]

Or we could review the report from the Dallas Federal Reserve, and the Recession looks even worse if we look at total costs to the overall economy : “Last month, the Federal Reserve Bank of Dallas published a staff paper estimating the costs of the 2007-2009 financial crisis. The conservative estimate came out at 40 to 90 per cent of 2007 output, roughly US$6 to US$14 trillion.” [INET]

Recessions reduce income, reduced income reduces tax collections, reduced tax collections reduce government revenue, reduced government revenue increases debt.

If “tax reform” is advocated as a way to recoup the losses from the Great Recession, then we need to move beyond the Supply Side Hoax.   The notion that lower taxation would lead to more government revenue, was then — and is now — a theory in search of reality.    From the “been there, done that” corner:

“Supply-side economics starts from the generally accepted economic insight that tax policy can influence private-sector decisions by changing the incentives to work and invest. But supply-side acolytes take this relatively mundane observation to an extreme conclusion. They argue that lowering taxes for people, especially for those who have a lot of money to invest, will always lead to better economic results, and furthermore, that lower taxes is the single most critical intervention the government can undertake to stimulate growth.

This assertion—that lower taxes for the rich will lead to improved economic results—is testable. Of course, pure natural experiments in economics are few and far between, but over the last 30 years the United States alternated between economic policies that were heavily influenced by supply-side ideas, then were not, then were again. This variation allows us to compare economic performance in the various eras. If proponents of supply-side theory are correct, then the supply-side eras should outperform the non-supply side era. But that’s not what happened.” [CAP]

Reduced to a single chart we can see the results of the Supply Side Hoax applied to the U.S. public debt.

Supply Side TrendsWhen we apply Supply Side policies the blue line (national debt) increases, when we don’t the national debt is reduced.

It would follow from this that the “No New Taxes” (aka Supply Side Mantra) line makes a lovely and enticing slogan, but the application of the policy hasn’t resulted in better levels of investment growth, significant gains in productivity, better overall economic growth, better employment numbers, more income for the middle class, or better wages for working Americans.  These are all associated with increased federal revenue levels, we would obviously benefit from adopting a more realistic pro-growth tax policy than simply adhering to the narrow “no taxes = pro-growth” incantations from the Supply Siders.

When the push runs into the shove, a discussion of tax policy in regard to the reduction of the national debt should realistically incorporate the means why which federal revenues can be increased, without exacerbating the already serious level of income inequality, stagnating wages and salaries, and burdens on the American middle class.

If we’re truly serious about discussing the means by which we are to address the level of the national debt, then pontificating and nibbling around the edges of the 15% of the Federal Budget which concerns non-defense discretionary spending doesn’t suffice.   Are the advocates of cutting the food assistance programs really trying to convince us that they are taking important steps to curtail federal spending when those programs comprise some 0.24% of the federal budget? [InteractiveCP]

There are, indeed, some very serious questions to be answered when the question of the National Debt is raised: Not is sound bites and slogans, but in sound economic thinking and earnest efforts on behalf of working Americans.

 

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Filed under Economy, Politics, privatization

Pushing Their Buttons: Then and Now

Socialism Buttons

Watching the Republicans marching carefully in the footprints of their fore-bearers makes for interesting television, and bad governance.   It doesn’t appear to matter to the Anti-New Dealers still among us that Social Security (and cuts thereto) is the Third Rail of American politics, and it’s instructive that the Tea Party Lady held up her sign reading: “Keep the Government Out of My Medicare.”    Their logic is simplicity itself: If it’s about the collective welfare of the United States and its citizens it’s Socialism.  If it’s Socialism then it must be Anti-American.

100% Americanism

Return with us now to the Red Scare — not the McCarthy Era, the first Red Scare.  The groundwork was laid by George Creel, President Wilson’s chairman of the United States Committee on Public Information, who was tasked with encouraging a reluctant nation into World War I.  [PBS] Americans were listening to the Four Minute Men in their movie theaters, some 7,555,190 speeches between April 1917 and November 1918.  They read some 6,000 press releases, and perhaps saw about 200,000 slide shows.  [SW] The Chambers of Commerce were recruited to help distribute the materials, as well as the Boy Scouts and various fraternal societies.  All the speeches, press releases, periodicals, and propagandizing had one point: Hate The Hun.

And then the war ended.  The Russian regime crumbled, and the Communists installed a new government. In the U.S. returning soldiers had trouble finding work, farmers who had been encouraged to plant fence to fence during the war found themselves with surplus crops and declining prices.   During this unstable period Theodore Roosevelt, Jr. and other interested officers formed the American Legion at the “Paris Caucus.” Subsequent organization of the modern version of the Grand Army of the Republic, lead to the adoption of its promotion of 100% Americanism at its 1919 convention.  The events in Centralia, Washington, November 1919, helped change the conversation.

The Centralia American Legion organized a parade for Armistice Day 1919, while members of the IWW worried that their headquarters were going to be raided, as had been the case with other IWW offices since August 1917.  There continues to be controversy about who shot first, who shot whom, and why anyone was shooting at all, but the result was that four people were dead, and the American Legion’s notion of 100% Americanism was attached in popular imagination with anti-IWW sentiment.  In this milieu it didn’t take too much imagination to substitute “Bolsheviks” for “Huns,” and associate Labor with Bolsheviks.  1920 was a turbulent time, with Red Hunting Results:

As a result of the strikes and unrest, the strikers were branded as “Reds” and as being unpatriotic.  Fear of strikes leading to a Communist revolution spread throughout the country.   Hysteria took hold.  “Red hunting” became the national obsession.  Colleges were deemed to be hotbeds of Bolshevism, and professors were labeled as radicals.  The hunt reached down to public secondary schools where many teachers were fired for current or prior membership in even the most mildly of leftist organizations. [UMKC]

That some opinion leaders tried to differentiate between socialism and communism didn’t substantially alter the ideological landscape or still some of the more radical rhetoric.   Anarchy, socialism, communism, even support for organized labor was “Left” and bad, conservatism and the “Right” was 100% American.

Fast forward to the late 20th century, after the enactment of Social Security and Medicare, and we have Rand Paul, then of  Kentucky Taxpayers United, explaining why Social Security is a Ponzi Scheme and Medicare is … (you guessed it) … Socialism. [TPM]

Privatization

Since there are 57,469,232 Social Security beneficiaries as of June 2013, of whom 40,298,999 are retired persons, 6,216,500 are survivors, and 10,953,733 are disabled individuals and their dependents [SSA] it’s no longer politically expedient to speak of repealing Social Security.   The modern opponents instead talk about privatizing the system.  Their “free market” solution to a non-existent problem involves transforming the Social Security program into “private individual accounts” to be invested in Wall Street.   Failing that, the opponents would like very much to have access to the Special Issue securities, which are held in the Social Security Trust Funds and are currently not available to the public.

The last serious attempt at Privatization came in President George W. Bush’s February 5, 2005 State of the Union speech the details of which changed as the President was buffeted by political winds.  The final gasps included private accounts, reduced benefits, clawback provisions, and limited investment in unspecified index funds. [CAP] By the end of 2005 the President’s proposal was DOA.   In fact, as of March 2005 about 58% of our “100% Americans” were opposed to the proposal.  [WaPo]

The privatization of Medicare isn’t meeting with much more enthusiasm, polling conducted in 2011  found 58% of Americans opposed the GOP plan to replace the Medicare program with private health policies for seniors  subsidized with coupons from the federal government.  [TPR]

In short, when faced with a choice of privatization or the “socialism” of the Social Security and Medicare, the American public prefers a little “socialism” in its political mix.

And now we come to the third button.

Republicans did a good job of associating the provisions of the “Obamacare” law with socialism, but perhaps not so much when the actual name of the law is put forward.  A Kaiser Family Foundation tracking poll in March 2013 found a majority favorable rating for the major elements of the Affordable Care Act, except for the individual mandate.   In short, people liked the tax credits for small business owners, closing the infamous dough-nut hole in Medicare Part D, creating insurance exchanges or marketplaces, extending coverage for dependents, subsidy assistance for those purchasing health care insurance, expanding Medicaid, etc… they liked the parts but not the demagogued whole.

The irony is that a minority in the House of Representatives, still held in thrall by the antiquated sloganeering of the early 20th century anti-Left siren songs, could bring down the economic system they purport to espouse — turning their paeans into a eulogy for the free market system.

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Filed under Politics

There They Go Again!

EisenhowerThe rhetoric surrounding the federal shut down because the House Republicans want to re-write history isn’t all that different from the hyperbole applied to the enactment of the Social Security Act in 1935. Here’s a taste:

 “This bill opens the door and invites the entrance into the political field of a power so vast, so powerful as to threaten the integrity of our institutions and to pull the pillars of the temple down upon the heads of our descendants.” Rep. James W. Wadsworth (R-NY) following a Ways and Means Committee vote, April 19, 1935

“Never in the history of the world has any measure been brought in here so insidiously designed so as to prevent business recovery, to enslave workers, and to prevent any possibility of the employers providing work for the people.” Rep. John Taber (R-NY) April 19, 1935

The Chamber of Commerce entered the fray with this timeless piece:

In other countries, the problem is handled by taking the necessary sum each year from the current taxes. Otherwise the load would get so big as to be a menace. On the other hand, if industry is burdened with too heavy taxes, the result may be more unemployment in the future, killing the goose that lays the golden eggs.  Harper Sibley, incoming president of the Chamber of Commerce, May 4, 1935

Really? Social Security was enacted into law, which didn’t prevent Americans from inventing and manufacturing Tupperware (1946), waterproof diapers (1946), transistors (1947), acrylic paint (1947), hand dryers (1948), felt tip marking pens (1953), zipper plastic storage bags (1954), videotape (1956), air-bubble packaging (1957), integrated circuits (1958), global satellite navigation systems (1960), computer mouse (1963), cordless telephones (1965), personal computers (1971).  [source]

President Dwight D. Eisenhower had this to say about Social Security in this prescient comment from 1954:

“Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H. L. Hunt (you possibly know his background), a few other Texas oil millionaires, and an occasional politician or business man from other areas. Their number is negligible and they are stupid.”  — Dwight Eisenhower in a letter to his brother Edgar, November 8, 1954

Plus ça change, plus c’est la même chose?

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Filed under Economy, Politics, Republicans

The Pro-Family Budget

Money whirl pool housingThe per capita money income for the average Nevadan is $27,625 according to the U.S. Census, which also tells us that the median household income is $55,553.  If we assume for the sake of keeping the arithmetic simple that is take home pay, then the household has approximately $4,630 per month for all household expenses.

The median contract for rental housing in Las Vegas in 2009 was $883.00 per month. [CD]  The median household cost for families with a mortgage stood at $1,783 per month. [CD]   If we subtract the median household mortgage cost from that median household income the remainder for household components is $2847.

Then there are the utilities.  The median household cost for utilities in Las Vegas is estimated at $82 per month, the mean is $208.00 [Bundle] If we subtract the median figure, the household now has $2765.

The average estimate for food expenses in Las Vegas is reported as $640 per month.  Now, there’s $2125 remaining. [Bundle] Nationally, the average monthly expenditure for food is $549.91. [BLS]

If our average household spends the national average amount on clothing and services as measured by the BLS, then we need to subtract another $1736 from the accounts for the year, or $162.00 per month. [BLS] We’re down to $1963.

Transportation expenses (automobiles ,gas, maintenance, insurance, etc.) will cost our median family approximately $750 per month; total average transportation costs ($8998/12) as reported by the BLS.  There’s now $1213 remaining.

Now we have to subtract the average health care expense of $296 per month from the family coffers each month, $917 remains.  Personal insurance and pension contributions will remove an average of $466 from the check book, there’s $747 remaining.

The “entertainment” budget (sporting events, sporting equipment, television, radio, sound equipment, video equipment, etc.)  will shave another $217.00 from the balance.  There’s $530 left.

If our median household donates the average monthly charitable donations, another $75 is subtracted. [BLS]  There’s $455 remaining.  The BLS also has a category called “all other expenses” which is a catch all for banking fees, personal hygiene care, reading materials, education (texts, tuition, etc.)  This would consume another $296 per month. There’s $159 remaining.

Here’s where the You’re On Your Own ideology goes off the Reality Rails.

Please don’t attempt to convince me that an “average” family in Nevada or anywhere else in this country for that matter, can personally save enough to secure the retirement of all adult family members without the safety net of Social Security and secured pension funds (to which our hypothetical median family has been contributing.)  However, the ideologues of the right would have us believe that an “average” family can self-fund not only retirement, but all the other security and social mobility assets as well.

Out of that $159 it’s expected a “family” can save for the educational expenses of all their children?  That the “family” can save for all medical expenses, regular and emergency, with a Health Savings Account?  That a family can save for a down-payment on a larger or better home?  That a family can save for the expenses related to a natural or emergency disaster — the out of pocket expenses necessary after a house fire?  That a family can save enough to afford to contribute to the housing and care services required for elderly members?   Our hypothetical family could shave the “entertainment” budget to the bone, could slash the “other” category down to the toothpaste purchases — and still not be realistically expected to cover all their future expenses completely on their own.

Their children will still need student loans at reasonable interest rates.   Their family will still need assistance getting affordable health care insurance.  Their family will still need help from the rest of us to secure a decent retirement and health care in their later years.

Those who purport to be Pro-Family would do better to espouse policies which actually support our average, middle class, families.

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Filed under Economy, Nevada economy

Income Inequality and The Great American Disconnect

There’s an interesting piece describing the results of a Northwestern University study on the political/economic perspectives of the top 1% of income earners in the United States:

“First and foremost, rich people care about the deficit. More than 85 percent of the survey participants said they considered the nation’s budget deficit to be a “very important” problem facing the country, the researchers found. In addition, nearly one-third of those surveyed said the budget deficit and too much government spending is the nation’s biggest issue.”  [HuffPo]

So, 85% of the ultra-rich in this country are focused on the national budget deficit — what of the other 99% of the American people?   The article reports that as of a CBS poll taken in 2011 only 7% of the nation as a whole are similarly concerned.   If we bring this a bit closer to today’s date we might be seeing the impact of continual  publicity given to the deficit issue as Congress lurches from manufactured crisis to manufactured crisis.  The Pew Center and Roper Center surveyed Americans in March 2013 with the following results:

Economic Poll

A CBS News poll in February 2013 showed about 11% of Americans focused on the deficit as the top national priority, the Quinnipiac Polling in January showed 20% giving the top priority to deficit reduction.  CNN showed 23% in January,  and Bloomberg polling reported 19% in December. [TPR]  The point may well be that in the last three months the number of people in the United States who view the budget deficit as the top national priority has never topped 23%.   There’s at least a ten percent gap — about 33% of the top 1% cite budget deficits.

We might be perilously close to a political situation in which the Congress of the United States of America is obsessing on a topic of major concern to only a few of its richest citizens.

What are most of the other people saying?  In the Pew/Roper polling 32% of respondents said JOBS and employment issues were their highest priority;  in the CBS polling 40% chose that topic; in the Quinnipiac polling 40% responded “the economy.”  The CNN poll showed 46% choosing “the economy,” and in the Bloomberg Poll 34% said “jobs and unemployment.” [TPR]  A person does have to statistically massage these numbers to reach the conclusion that the ultra-rich are focused on budget deficits while the remaining 99% are thinking about jobs and unemployment.

Needless to say, the top 1% saw “entitlement spending” as a problem and supported cuts to Social Security, Medicare, and Medicaid as a “solution.”

“On policy, it wasn’t just their ranking of budget deficits as the biggest concern that put wealthy respondents out of step with other Americans. They were also much less likely to favor raising taxes on high-income people, instead advocating that entitlement programs like Social Security and healthcare be cut to balance the budget. Large majorities of ordinary Americans oppose any substantial cuts to those programs.” [LAtimes]

While the effects of drum beating by conservatives that the Social Security Administration is “in trouble” is evident in some polling, there’s one interesting question raised in the August 2012 AP/Roper survey:

“If you had to choose, which would you prefer: raising Social Security taxes so that the benefits can be kept the same for everyone, OR, keeping Social Security taxes at the same rate they are at now, but reducing the benefits for future generations?”

The results:  Raise taxes, same benefits = 53%; Same tax, reduce benefits = 36%; unsure 9%, refused question 3%.   In other words, when push meets shove, most Americans are willing to accept higher Social Security taxation than risk reducing the benefits for ALL retirees.   This is hardly an indication that most Americans would be willing to cut Social Security in order to balance a federal budget.   There are other divides to bridge between the rich and the rest as well:

“While the wealthy favored more government spending on infrastructure, scientific research and aid to education, they leaned toward cutting nearly everything else. Even with education, they opposed things that most Americans favor, including spending to ensure that all children have access to good-quality public schools, expanding government programs to ensure that everyone who wants to go to college can do so, and investing more in worker retraining and education.”  [LAtimes]

In 2012  Pew Research polling, 53% of self identified upper class respondents and upper middle class ($100,000 annual earnings) had college degrees.   Thus, the rejection of educational opportunity programs for others smacks a bit of “I’ve got mine, now you’re on your own.”    This may be a function of the differentiation between the problems faced by the rich and those faced by the remainder of the population.  [Pew 8/2012]

 Upper Class Problems

Given the information in the Pew graph it’s hard NOT to see that most of  the upper echelon of our American economic elite have not had to face the same challenges as those in middle and lower income brackets.   What is disturbing about these graphics and analysis is the looming prospect that the interests of the economic elite take media and political precedence over the interests and needs of those who are not included in those upper brackets.   Trickle down politics (If it’s good for the rich it’s good for everyone) is no more genuine than trickle down economics (If it’s good for corporations it’s good for everybody.)

For more information see: “Rich Americans obsessed with budget…” Huffington Post;  “Inside the heads of the 1%…” Los Angeles Times; “Yes, the rich are different…” Pew Research Center; “Field of Degree and Earnings…” pdf Census Bureau.

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Filed under Federal budget, income inequality, Politics, Social Security

Bait and Switch Political Economy

Free CheeseSo, why are we really stuck in the Silli-quester?  The one option that was supposed to be so distinctly unpleasant and irrational that both major political parties would eschew any connection to it and thereby be inclined to adopt compromise measures?  Bait and Switch.

Why are the punditocracy chattering on about how both sides should exercise some political rationality (if that isn’t an oxymoron) and move to the discussion about serious economic needs, such as job creation (without all the inanity of trickle down hoax-isms) and debt stabilization?  Bait and Switch. Why Bait and Switch?

Beneath all the chatter are some very different world views, political ideologies, and priorities.  In an ideal world there would be less reason to discuss who is to blame for the economic mess in which we find ourselves, and more reason to sit down and talk about how we (1) encourage economic growth and (2) stabilize our indebtedness.  This obviously isn’t a perfect world.

It’s going to take some good old fashioned rational discussion in a FACT based universe to get out of this muddle.  The facts are unpleasant on both sides of the polarized political flanks, but they do need to be the main topics of conversation before we can get out of the Bait and Switch model.

The Bait

This is all about stabilizing the national debt.  Yes, and no.  Those who are truly of sound mind and reasonable thinking recognize two things: (a) We have a situation in which health care costs are driving up federal expenditures just as they are taking a larger chuck out of family finances; and (b) our tax laws need some reform — real reform — not merely another excuse to reduce taxes on the economic elite who are more inclined to indulge in speculation than in the less profitable but more productive investment in industrial and commercial development.   The third fact of life is that we engaged in not one, but two wars, an activity designed to suck the sustenance out of any consumer based economy.

The Switch

This is all about the national debt.  Is it? Or, is it cover for indulging in the enaction of Austerity economics which calls for the reduction of government spending without increasing government revenue?  Consider the vehement opposition of the Tea Party caucus of the House GOP to any suggestion that we need to enhance revenue to reduce and stabilize the national indebtedness.  If this group were truly speaking to the unsustainability of our current debt trajectory then revenue increases would be a logical portion of the debate.  However, it’s not.  The debt level becomes the bait, and the unwillingness to even consider revenue increases signals that their real object is what it has always been — an adherence to the mythology that government (even a government trying to serve the needs of 330 million people) is Too Big and needs to be restricted.  As usual, Robert Reich has summarized the problem succinctly:

“Tea Party Republicans are crowing about the “sequestration” cuts beginning today (Friday). “This will be the first significant tea party victory in that we got what we set out to do in changing Washington,” says Rep. Tim Huelskamp (Kan.), a Tea Partier who was first elected in 2010.

Sequestration is only the start. What they set out to do was not simply change Washington but eviscerate the U.S. government — “drown it in the bathtub,” in the words of their guru Grover Norquist – slashing Social Security and Medicare, ending worker protections we’ve had since the 1930s, eroding civil rights and voting rights, terminating programs that have helped the poor for generations, and making it impossible for the government to invest in our future.”

These are the people who took President Ronald Reagan’s message to heart, “The government is the problem,” and then took the philosophy further than that former President ever considered.  The radical right wing of the Republican Party has created an environment in which even the Speaker of the House can’t get legislation to the floor, or must break his own “Hastert Rule” to get anything passed.  There may be a core of rational Republican members of Congress who might give thought to compromising and indulge in some serious discussions about government spending, taxation, and infrastructure investment — BUT each one of them sits beneath the Damocletian Sword of a primary challenge from some candidate even more conservative than themselves.

Real Problems Should Have Realistic Solutions

While it would be nice to assume that social safety net programs such as Medicare and Medicaid are sustainable in the present context, that really isn’t a reasonable conclusion.  Recognition of the problems associated with maintaining an acceptable level of service to Medicare beneficiaries is essential.

The solution presented by Rep. Paul Ryan to privatize the Medicare system and transform it into a coupon-care or voucher program doesn’t solve the problems any more than calling for the program to continue without further improvements.   The real problem is the rising cost of health care delivery, and until we can address how to reduce the costs increases the programs for health care assistance will be financially unsustainable.

Those who have not yet read Steven Brill’s excellent piece in Time magazine should do so immediately.   Here’s an essential part of the reporting:

“When you look behind the bills that Sean Recchi and other patients receive, you see nothing rational — no rhyme or reason — about the costs they faced in a marketplace they enter through no choice of their own. The only constant is the sticker shock for the patients who are asked to pay.  Yet those who work in the health care industry and those who argue over health care policy seem inured to the shock. When we debate health care policy, we seem to jump right to the issue of who should pay the bills, blowing past what should be the first question: Why exactly are the bills so high?”

Nailed It!  And Brill goes on to explain or describe the basic issues involved, such as the inflated prices for common products, the perverse economics of medical technology, bills to match the catastrophic nature of the illness or injury, and the handcuffs on Medicare.

Tea Party Caucus radicals would have us believe there is no middle ground between transforming the Medicare program into a privatized voucher system and turning Medicaid into a parsimoniously funded block grant program and Socialized Medicine.  This is not the case.  It’s certainly not the case when we examine what happens in the health care market, when “insurance isn’t insurance” and chargemasters determine “opening bids” for costs.  Health care cost containment is the essential issue — we should be asking, as Brill suggests, not who should pay, but how much should be paid — by anyone, public or personal.

The Affordable Care Act has some features which will reduce the costs of medical services and treatment, but it is not the answer to the dilemma of how to fix a “broken market.”  Ideological squabbling over Repeal or Not To Repeal is a waste of time, and of time which would be better spent trying to solve the Gordian Knot of health care cost containment.

There are two things, often suggested, and in the past often done, which would alleviate some of the problems associated with Medicare and Medicaid funding. First, we could allow the Department of Health and Human Services to negotiate prices for prescription medication. Secondly, we could get serious about regulating and rationalizing the pricing structures of hospital and medical services.

The inclusion of Social Security “reform” in the Silli-quester debate is informative,  since the program is self funding and doesn’t add to the national level of indebtedness, the only reason for incorporating it into the “entitlement” discussion is to cut it — as radical right wing adversaries have wanted to do since it was enacted during the Depression.  We could, for example increase the liability cap above the current $113,700 in income for the Social Security program. There’s a boatload of difference in the financial resources of a family with an annual income of $1,113,700 and a family with annual resources of $113,700.  Surely those in the upper 0.1% of the income pyramid could afford to pay in a bit more?

The use of the Chained CPI isn’t a popular suggestion, but the chains may not be shackles.

“While no one knows what a full elderly CPI will show, we do know that switching the COLA to a chained CPI will reduce lifetime Social Security benefits by an average of about 3 percent. This doesn’t raise a huge amount of money, but it would be a big hit to seniors, 70 percent of whom rely on Social Security for more than half of their income.” [CEPR]

The problem, of course, is that elderly people don’t purchase items that show up in the inflation calculations (cars, electronics, etc.) as often as younger people; but, they do spend on housing and health care. (See health care cost containment above).   There is nothing essentially wrong with discussing the Chained CPI if it can be done reasonably.  For example, could the index be adjusted to account for the variance in inflation associated with the consumption patterns of elderly individuals?  Or, if we can achieve some kind of stable economic growth would the reductions in benefits associated with the Chained CPI be mitigated?  Bellowing, “Social Security is a Ponzi Scheme,” or “There won’t be anything left for Junior,” isn’t the way to start a discussion about these details any more than the absolute “Don’t Touch Social Security”  in any way, shape or form is on the other hand.   Note that both the Medicare and the Social Security inflation adjustment issues are related to the bug-bear of health care cost containment?

It’s not just our population that’s aging. So are our bridges, highways, parks, and other public facilities.  We have aging public building that could lower their utility costs with upgrading, and we have aging public structures which should be replaced.   And, then there are schools:

About one-fourth (28 percent) of all public schools were built before 1950, and 45 percent of all public schools were built between 1950 and 1969 (table 1).Seventeen percent of public schools were built between 1970 and 1984, and 10 percent were built after 1985. The increase in the construction of schools between 1950 and 1969 corresponds to the years during which the Baby Boom generation was going to school. [NCES]

Not to put too fine a point on it, but after 60 years most school buildings need so much renovation that they aren’t functional and most are abandoned.

Since we probably can’t build everything at once, how about focusing on roads and bridges?  Various suggestions have been made concerning upgrading American infrastructure, and if we want to have a serious discussion about this topic we might begin with the obvious — crumbling roads and bridges.  Why not allow the U.S. Treasury to issue some long term bonds (30 year) expressly for the purpose of addressing transportation infrastructure needs?  This could be a win-win proposition.  The bondholders have a safe haven investment which is interest earning, the public gets better roads and bridges, and if we must have a “pay for” element we could consider increasing fees or use taxes by a minimal amount, again expressly for the purpose of paying off the bondholders.

These kinds of suggestions deserve more attention than they are getting, but they will not get serious consideration until ideologues stop screeching “the government can’t create jobs,” or “we can’t increase taxes any taxes any time,” as the bridge slowly crumbles beneath us.   The bond issuance idea deserves a serious moment — the public assets values increase, the bonds earn interest for the investors, and everyone’s safer.   Little wonder then that the AFL-CIO and the U.S. Chamber of Commerce are both supportive of infrastructure investment.   Short term, the construction sector of the economy gets a boost; long term the investors and the public benefit from the proposal.

Taxing Issues

We do need tax reform.  What we don’t need is one more scheme to shift the burden of financing government from the economic elites to working men and women in America.  Yes, that would be the old Flat Tax canard.   In case Speaker of the House Rep. John Boehner would like to find the President’s plan for revenue and budget stability it’s located in plain sight right here.  The proposal includes one tax reform that should be given some attention.

The President proposes that itemized deductions be limited to 28% for wealthy individuals.   What should be on the table in addition to this suggestion is the variance in the way we tax earnings.  As former FDIC Chr. Sheila Bair has noted, “Why does a hedge fund manager pay lower tax rates than a shoe store manager?”  Good question. Additionally, no one has yet put forth a credible argument (complete with some hard data) to sustain the idea that the investors are really “job creators,” but factory and office  managers definitely are those making staffing and hiring decisions.   We might also give some time to the issue of allowing corporations to indefinitely defer taxes on profits made overseas.

Republicans in the 2012 campaign season often spoke of closing loopholes, however vaguely those were described.  Let’s get specific.  Why are there loopholes for corporate jets? For yachts?  For highly profitable oil corporations?   Both sides of the aisle might want to talk about the possibility that if a sufficient number of these loopholes were closed then perhaps the overall rates could be reduced?

In short, if we are truly looking toward stabilizing our national debt, as opposed to merely trying to drown our government in a bath tub,  there are rational ways to do it — but in order to accomplish that we need to have some rational discussions about the route we choose.  Bait and Switch is never a good starting point, but abatement in the hyperbole and switching to a more reasonable level of civic discourse would be an excellent place to begin.

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Filed under Congress, Economy, Politics, Taxation

Nevada and the Silli-Quester in the Mythical Land of Moonshine

MoonlightHappy News:Annual adjustments to Nevada’s labor market show the state’s unemployment rate for 2012 dropped from a preliminary estimate of 11.6 percent to 11.1 percent and that Nevada gained 18,100 in employment over the year, up from the previous estimate of 9,300.” [DETR pdf] A graph of Nevada unemployment rates for the past five years shows:

Nevada Unemployment five year

The current rate is reported as 10.2%.   The Nevada YOY employment growth rate is 1.7%. [DETR]  Any improvement is acceptable, but more would obviously be better.  Unemployed workers curtail spending — a drag on local retail economies, and unemployed workers who curtail spending pay less in sales taxes.   The improvement in employment figures during 2012 showed up in the state sales tax information:

“Statewide taxable sales for December 2012 of $4,343,847,392 represents a 3.0% increase over December 2011 and a 5.1% increase for the fiscal year.  The largest increases in statewide taxable sales were realized by Food Services and Drinking Places, up 5.4%; Specialty Trade Contractors, up 60.9%; Motor Vehicle and Parts Dealers, up 10.0%; Clothing and Clothing Accessories Stores, up 5.9%; and Telecommunications, up 38.2%.”  [NDT Dec 2012]

Now we can get to the philosophical part.  A state which reduces its spending not only reduces the level of service to its citizens, but it also constrains the aggregate demand in its own economy.   As of 2010 Nevada ranked 32nd in the nation as categorized by state GDP ($127.5M).  The budget proposed by Governor Sandoval restores some hiring, reduces furloughs, and addresses some infrastructure needs. [pdf download]  We’ll be paying for this with a relatively regressive tax structure.

Nevada Revenue 2012(Full Size Chart click here (pdf)]

Nevada Revenue 2012 chart

Operating grants are funds from federal sources.  The “other” taxes are the Modified Business Tax, insurance taxes, and property related taxation.  We are “pleased” to promote ourselves as a state without personal or corporation income taxation, so we are stuck with taxing sales, property, gaming, and business operations.  All dependent in one way or another on consumer spending.  Be ye rich or poor you’ll spend the same amount for sales tax on a box of bolts.  Further, we’re going to jeopardize our fragile recovery by adopting Austerity Economics at the federal level.

Here comes the Silli-quester part of the puzzle Note the 8.09% drop in federal spending in Nevada since the last budget in the previous chart.  Now, imagine we’re going to use a meat axe to cut this level back even further.  The cuts won’t all come at once, but if the sequestration of funds continues there will be reductions in spending for Title I schools, for nutrition programs, and for other government services.   States with less regressive taxation structures might be able to absorb the reductions with less pain, but Nevada doesn’t have even that minimal luxury.   Its revenues are closely tied to the employment levels both domestically and nationwide.

At this point we need to deal with some conservative mythology which underpins the current demands for federal spending reductions.

#1. The first thing required to create a debt or deficit crisis (and these two things are not synonymous) is to convince the populace we have The Very Worst Debt Crisis Ever In The History Of Humanity.  We don’t.

“In fact, we’ve been here before.  In 2009, the federal budget deficit was a whopping 10.1% of the American economy, and back in 1943, in the midst of World War II, it was three times that — 30.3%. This fiscal year the deficit will total around 7.6%. Yes, that is big. But in the Congressional Budget Office’s grimmest projections, that figure will fall to 6.3% next year, and 5.8% in fiscal 2014. In 1983, under President Reagan, the deficit hit 6% of the economy, and by 1998, that had turned into a surplus. So, while projected deficits remain large, they’re neither historically unprecedented nor insurmountable.”  [Salon]

Notice, that if we do nothing — the deficit will still decline from 7.6% of GDP to 5.8% in FY 2014.  And, it’s hardly the Greatest Worst Thing That’s Ever Happened.   It is, however, the only peg on which the GOP controlled House of Representatives can attempt a bit of hostage taking thanks to the provisions of Article I, Section 7 of our Constitution. “All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other bills.”

#2. ” Our spending, our spending I say, is Out of Control.” Not so much.  Consider this often published chart from Forbes Magazine on federal spending by recent administrations:

Obama spending forbes chart

So, when does 1.4% annualized growth in spending become “out of control” compared to the first Reagan term 8.7%? Or, to the two Bush II administrations rates of 7.3% and 8.1%?

#3. “But, but, but…we’re saddling our grandchildren with DEBT!”  Before the hysteria becomes too cloying, it’s well to remember that federal debt isn’t anything like household debt.  Unless, of course, your household can issue Treasury Bills and Notes which are universally recognized as safe investments.  You and I have creditors.  The United States of America has investors.   And, better still, some of our grandchildren — the ones on whom we have bestowed gifts of Savings Bonds — are some of those investors.  In fact, as of 2011 the Federal Reserve held about 16% of our public debt, state and local governments held about 6%, and domestic and private investors owned 32%. [GAO]

#4. “But, but, but…we’re literally getting owned by China!”  Yes, foreign investors hold the remaining 46% of our public debt, but they have reasons for that which don’t sound like Gloom and Doom.  For example, we are the world’s reserve currency.  The good old U.S. dollar was used in about 80% of all financial transactions in global foreign exchange markets as of April 2011.  That being the case, we can borrow on the Full Faith and Credit of the U.S. to make up for gaps in our own savings rates.

“…an economy open to international trade and investment, such as the United States, essentially can borrow the surplus of savings of other countries to finance more investment than U.S. national saving would permit. The flow of capital into the United States has gone into a variety of assets, including Treasury securities, corporate securities, and direct investment. [GAO]

Further, true to the don’t put all the eggs in one basket rule for investors, our foreign counterparts aren’t pouring all their investment into our public debt, as the following fancy graph from the GAO report demonstrates:

Foreign Investment US

#5.We have to reform entitlement programs or we’ll never get out of this No Good Horrible Debt.”   Not. So. Fast.   Now, we’re getting down to the core  part of the conservative strategy.  “Reform” in that context means Privatize.   Let’s dispense with the Social Security part of the issue first.

“…today the Social Security trust funds hold $2.8 trillion in government bonds. These reserves have been built up with the contributions that workers and employers have paid into the system for the dedicated purpose of paying Social Security benefits. These funds are held in legally established trusts and cannot be used for any purpose other than paying benefits. According to the latest Trustees’ report, Social Security can pay full benefits through 2033, and roughly 75 percent of benefits beyond that time.”  [AARP]

Those bonds are non-commercial, highest priority Treasuries not available to Wall Street Bettors and Traders.  Social Security adds not one thin dime to our national debt, and therefore, as President Ronald Reagan once stated, should NOT be part of any “deficit reform” package. [PoliticusUSA] If we’d like to make the system even more secure there’s always the option of raising the cap on earnings subject to Social Security. [EPI]

“But, but, but… there’s nothing but IOU’s in the Social Security Trust Funds.”  I’d like to get some of those IOUs… but as a private investor I can’t.  They are privileged funding sources for the Social Security Administration and I can’t play with them in the equities markets.   The SSA phrases this more elegantly.

“There can be no question that the Federal old-age and survivors insurance and disability insurance trust funds and the Board of Trustees of those funds were created by and are subject to laws enacted by the Congress of the United States. To that extent, they are a part of the United States Government. These funds, however, are entities separate from and independent of the rest of the Federal Government. The income and disbursements of the funds are not included in the administrative budget of the Government. Instead, the President reports their operations separately in his Budget Message to Congress and the Board of Trustees is required to submit to Congress annually a report on the operations and status of the funds. The debt obligations held by the trust funds are shown in Treasury reports as part of the Federal debt, and interest payments on these obligations are regularly made by the Treasury to the trust funds. They are redeemed in cash by the Treasury whenever necessary for disbursements by these funds. (emphasis added) [SSA]

#6.But, but, but, Medicare is going broke!”   Medicare does have problems, the worst of which are rising costs of health care in the United States.  To wit, the conservatives offer the following canard — Obamacare endangers Medicare.  No, actually it doesn’t.   If by “endangerment” one means that the Affordable Care Act provisions have saved the popular program about $6 billion in drug costs — then let’s have more endangerment, please. [HuffPo]

And if by endangerment, one means that the provisions of the Affordable Care Act are beginning to bend the curve on rising health care costs, then let’s have more:

“Douglas Elmendorf, Director of the CBO, noted that while much of the savings are the result of a loss of wealth due to the recession. But, for the first time, Elmendorf was willing to say that a ‘significant part’ of the savings are the result of structural change in how healthcare is now being delivered.” [Forbes]

We might also want to consider allowing the Department of Health and Human Services negotiate for Medicare supported prescription drugs?  Or, we could pause a moment from the current hysteria, and allow some of the provisions of the ACA to kick in, and support the efforts of the Administration to curb Medicare fraud and abuse.

“According to the Congressional Budget Office, this health-reform legislation will reduce budget deficits by $119 billion between now and 2019.  And only around 1% of American households will end up paying a penalty for lacking health insurance.

While the Affordable Care Act is hardly a panacea for the many problems in U.S. health care, it does at least start to address the pressing issue of rising costs — and it incorporates some of the best wisdom on how to do so. Health-policy experts have explored phasing out the fee-for-service payment system — in which doctors are paid for each test and procedure they perform — in favor of something akin to pay-for-performance. This transition would reward medical professionals for delivering more effective, coordinated, and efficient care — and save a lot of money by reducing waste.” [Salon]

A reduction in the deficit of $119 billion by 2019 sounds like we’re headed in the right direction — without privatization or voucherization or whatever the popular conservative term of the day might be.

Moonshine

In the dark world of conservative TeaParty GOP thinking, Nevada and 49 other states will have to absorb a reduction in federal spending — thus crimping their already strained budgets — because of a debt crisis that really isn’t critical, deficits which are NOT out of control but are actually declining, and social safety net programs which are (a) not adding anything to the Hideous Heinous Debt, or (b) being reformed without resorting to radical prescriptions like privatization or voucherization.

The current caterwauling by the GOP about the deficit or the debt is part and parcel of the only way they can obstruct the Obama Administration — using the appropriation  powers granted unto them in the House of Representatives.  They will hold the national economy hostage in their own moonlit nightmare of irrelevance, clutching the only cudgel at hand.

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Filed under Economy, Medicare, Nevada economy, Nevada politics, nevada taxation, Social Security

Yes, We Could Be Having A Serious Deficit Reduction Discussion?

Tea Party FlagAt some point in the ongoing discussion about federal debts and budget deficits everyone needs to get serious.  Serious, that is, about doing that which will reduce our federal deficit spending.  Really serious, not as in “let’s wave a Debt Crisis Flag every three months to advance an agenda including the privatization of Social Security and the voucherization of the Medicare program.”

Let’s start with the obviousSocial Security doesn’t add a dime to the national debt.  If the words of a progressive blogger won’t suffice, how about listening to former President Ronald Reagan?  (video here)  So, discussing “reforms” to the self funded Social Security program as a means to reduce the national debt is extraneous to any serious deficit reduction discussion.

One way to approach the privatization of Social Security is to change the frame of reference, such as altering the connotation of “entitlement” from some earned benefit to which we are entitled because we paid for it, to one which has a tinge of “welfare” about it.  Social Security is not a welfare program — it is an earned benefit.  People who have paid into it all their working lives have every right to expect to be getting something back.  Social Security is not a retirement program.  It is a program which seeks to prevent abject poverty for elders.   Nothing in the Social Security program prevents anyone from maintaining a self-contributory retirement account of any shape or form.   Indeed, the benefits from Social Security are low enough that retirement to the Gated Golf Paradise Of Your Choice can only happen if you have a self-contributory retirement savings program. Anyone suggesting that “entitlements” such as Social Security “have to be reformed” to ease the burden on the federal debt (1) doesn’t have a clue what they are talking about, and (2) is regurgitating anti-safety net talking points from radicals who want to privatize all retirement income programs to the benefit of Wall Street investment firms.

Medicare does have some issues.  The first, and most readily apparent, is that the Medicare Part D (prescription drug) segment is, and always has been, underfunded.  However, the really big monster under the Medicare bed is the increasing cost of health care in America.  When private health care corporations started buying up religious organization/private, state, and locally supported hospitals the profit motive surged in the sector.  Health care must now generate a profit.  Savings, which were once achieved for the purpose of reducing costs for local tax payers or donors to religiously based institutions, now accrue to the corporate bottom line — not to taxpayers, donors, or patients.

The second factor is technology.  We do have the best medical treatment providers in the world.  However, best often translates into “most expensive.” We have all manner of devices and gadgets and equipment and gear to save or sustain lives.  Our hospitals take it as their mission to save or sustain life, which is all well and good until the emotional meets the economical.  There are “death panels” in this country, but they aren’t governmental — they are familial, with families making ‘end of life’ decisions which horrifically in some instances are based on what the family can afford.   Frankly speaking, we don’t do a very good job of educating our citizens about advance directives.  Some conservatives set up a howl when they noticed the Affordable Care Act provided for paying physicians or other medical professionals who provided ‘end of life’ counseling for their patients — however, a little counseling might go a long way toward reducing the anxiety of hospital personnel and the trepidations of family members.  It could also provide some savings in the long run.

Returning to the Big Problem — the Medicare Part D component; we knew in 2003 that the Part D segment would  cost approximately $534 billion.  [Foster pdf] Simply put, “the drug benefit had no dedicated financing, no offsets and no revenue-raisers; 100% of the cost simply added to the federal budget deficit,..” [Forbes]  The part about “dedicated financing” is important.  While the Social Security trust funds have dedicated financing (payroll taxes) there were no provisions to increase the revenues available to finance the Part D enhancement.   There is something unappealingly ironic about the current GOP insistence on “entitlement reform” because “Medicare is broken,” when it was the GOP majority in 2003 that Broke the Program.

Ways to ‘reform’ the Medicare program have been suggested which do not require “voucherizing” the entire thing and sending seniors back to pounding pavement in order to find affordable health insurance plans.  We could consider means testing for the prescription drug benefit.  We might take under advisement lifting the earnings cap for payroll taxes from the current $110,000 level and dedicating a portion of the revenues toward the Part D program.  We could allow the Department of Health and Human Services to negotiate for prescription drug prices the way the Veterans Administration bargains for prescription drugs for VA hospitals and clinics.

If we are REALLY REALLY SERIOUS about ‘reforming’ Medicare then it would be helpful to get past the silly voucherization proposals, referred to as “structural reform” in Speaker Boehner’s response to the President, [Boehner pdf]  and get to the core of what makes health care expensive — we could talk about health care cost containment, dedicated financing for Medicare, and lifting the earnings cap.   We might also want to take a deep breath and see if the Affordable Care Act’s provisions, such as eliminating tax payer subsidies for profitable private Medicare Advantage insurance policies, could achieve some savings over the next decade.

However, it’s getting relatively obvious that the Republicans aren’t terribly serious about deficit (debt) reduction when their offers are strictly ideological (privatize and voucherize) and the proposals don’t address the monster of their own creation — the lack of financing for Medicare Part D.

Buzz Words and Generalities.   Speaker Boehner is offering (pdf) “pro-growth tax reform that closes loopholes and deductions while lowering rates.”   This phrasing is coming perilously close to the older verbiage: Waste, Fraud, and Abuse.  As if we could make up any gaps in program funding by simply cutting out the WFA.  Most anti-tax advocates cite the WFA as some massive potential figure which if reduced could cure all our fiscal woes.  When pressed to provide total figures associated with the largely mythical WFA these advocates provide outlier examples of welfare fraud, some particularly egregious Pentagon payments to contractors, and perhaps a bit of information from Internet e-mail chain letters.  The WFA numbers have yet to yield up the level of financing needed to close budget gaps in the Pentagon or any other government activity.

The arithmetic from “loopholes and deductions” doesn’t add up either.  The same sort of fantastical thinking is required to equate the WFA savings and the L&D revenues.  These mythological creatures are based on the same gossamer upon which anti-tax advocates conjure up the notion that an inordinate amount of the U.S. budget is allocated to foreign aid.  The average American has come to believe that foreign aid takes up 10% of the federal budget, when if fact it consumes only 1%. [NYM]

The Republicans also appear to be consuming their own rhetoric on savings associated with reductions in federal employee compensation.

“Cutting pensions and benefits for government workers is popular, but once again most Americans overestimate how much that costs the government. On average, Americans think the federal government spent 10 percent of its 2010 budget on pensions and retiree benefits; the OMB figures indicate the real number is about 3.5 percent.” [CNN]

The moral of this story is that if the amounts of spending on pensions and benefits, or the amounts that can be retrieved by closing loopholes and eliminating deductions, are grossly inflated, then the resulting policy and budget decisions will be widely off the mark.

Unfortunately, the same type of ideologically based proposals which are the core of Speaker Boehner’s “structural reforms” i.e. voucherization and privatization of Medicare appear to inform his suggestions about federal employee compensation, and another favorite GOP target, SNAP (food stamps.)

The program is already under assault from all sides, considering the appropriations being entertained in the agriculture bill.

The Senate’s version of the farm bill would reduce overall funding by $23 billion, with a reduction in food stamps of $4.5 billion over five years. The House Agriculture Committee is proposing to cut funding by $35 billion — with nearly half the overall cut coming from reductions in food stamps by $16 billion over five years. [Atlantic]

But there’s a problem here.  Food stamps have a beneficial effect on the national economy.

“Those who believe in cutting SNAP funding as a cost-saving measure should know that food stamps boost the economy — not put a strain on it. Supporters of federal food benefits programs including President George W. Bush understood this, and proved the economic value of SNAP by sanctioning a USDA study that found that $1 in SNAP benefits generates $1.84 in gross domestic product (GDP). Mark Zandi, of Moody’s Economy.com, confirmed the economic boost in an independent study that found that every SNAP dollar spent generates $1.73 in real GDP increase. “Expanding food stamps,” the study read, “is the most effective way to prime the economy’s pump.” [Atlantic]

If the object of the game is to increase federal revenues by generating a higher GDP along the formula proposing that a growing economy produces jobs, and more jobs yield more taxable income, and more taxable income means more revenue — then the GOP has the SNAP portion of the argument exactly backwards.  They are proposing to cut a program which actually generates more economic growth.   If one seriously believes that economic growth means more revenue and hence less indebtedness, then one can’t seriously advocate cutting programs which elevate levels of economic growth.

All Pain and No Gain.  The two sides don’t seem to be speaking to the same fiscal slope, cliff, gully, whatever.  From the Republican perspective the damage to the economy might be done by The Specter of Rising Taxes.  Those legendary Job Creators — who are now seeing record corporate profits while wages continue to stagnate — might not invest, and hence there will be no economic growth.  This is fundamental Supply Side Hoax thinking.  That it has been, and still is, a hoax is demonstrated neatly by this graph from the Federal Reserve Bank of St. Louis:

Corporate Profits Low Wages

The blue line represents wages, the red line corporate profits.  If corporate well being were the driver of overall economic growth and  well being then why has the blue line been trending downward since 1970?  The answer is simplicity itself: Supply Side Economics is a Hoax of the First Water.

A deficit reduction plan predicated on ideology, urban legends, misunderstandings, and economic illiteracy isn’t SERIOUS.   That conclusion further advances the argument that the Republicans aren’t really serious about debt or deficit reduction, but merely see the issue as a flag to be waved in the van of their attack on the social safety net, a banner of privatization signaling their allegiance to Tea Party politics.

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Filed under Economy, Health Care, health insurance, income tax, Medicaid, Medicare, national debt, Social Security

S. 3468: It’s Baaack…and shouldn’t be

Heads Up!  They’re back, againS. 3468 is yet another attempt by the financialists and related banking lobbyists to hamstring efforts to regulate the financial services sector.   It’s not like these interests have ever given up their campaign to revert to Business As Usual  such that the Wall Street Wizards can become yet another font of ill advised, incomprehensible, albeit highly profitable synthetic or otherwise manufactured financial products — You know, things like those adorable synthetic CDO’s which flooded the financial market with valueless toxic paper.

Here’s the CRS summary of the bill submitted by Senator Rob Portman (R-OH) on behalf of the banking sector:

Independent Agency Regulatory Analysis Act of 2012 – Authorizes the President to require an independent regulatory agency to: (1) comply, to the extent permitted by law, with regulatory analysis requirements applicable to other federal agencies; (2) provide the Administrator of the Office of Information and Regulatory Affairs with an assessment of the costs and benefits of a proposed or final significant rule (i.e., a rule that is likely to have an annual effect on the economy of $100 million or more and is likely to adversely affect sectors of the economy in a material way) and an assessment of costs and benefits of alternatives to the rule; and (3) submit to the Administrator for review any proposed or final significant rule.

Prohibits judicial review of the compliance or noncompliance of an independent regulatory agency with the requirements of this Act.

Translation: If any of the financial regulatory agencies, like the SEC, the OCC, the FDIC, or the CFTC wants to approve regulations which might have a “significant effect” on some bank’s bottom line, then the agency would have to present a “cost – benefit analysis,” and submit the rule for administrative (read executive branch) review.

There are some very cogent reason to be extremely skeptical about this bill.

#1.  It dramatically changes the relationship between the administration (executive branch) and the independent financial regulators.   The SEC, et. al. are supposed to be independent of the executive branch, which is why their leadership is subject to confirmation.  To require that the agencies present their proposed rules for executive approval inserts presidential politics directly into the rule making process.

Those who find the diminution of regulatory oversight disturbing will not be pleased with this proposal. Nor will those who decry the transference of yet more power to the executive branch.   There’s nothing here for either end of the political and ideological spectrum.

#2.  It invites endless litigation.  S. 3468 could be alternately named the Wall Street Attorneys’ Full Employment Act.  For those of us who believe that the interminable foot-dragging on CFTC regulations of the derivatives market has gone on long enough, this is entirely too much, [CFTC law] the Portman bill merely serves to add yet another bureaucratic roadblock before regulations can be finalized.  [Lieberman/Collins pdf]

#3. It prevents agencies from acting in a timely manner.  Again, inserting a secondary layer of “review” invites both executive interference and financial sector slow walking before any effective oversight of financial institutions can be effected.

#4. It is redundant.  All the agencies involved, with the single exception of the Federal Reserve, are already required to do formal cost-benefit analyses of proposals.  In case no one had noticed during the attempts to get the provisions of the Dodd Frank Act implemented that the banks have been availing themselves of these requirements to slow down the whole process — they have.  All this bill accomplishes is to slow the process down from a crawl to a drag.   Here’s why:

“The thirteen new analytic requirements this legislation could impose are only the beginning of the delays and burdens it would create. The mandated OIRA review of significant rules would take up to six months. In addition, the review process could force agencies to go back to the drawing board or do a re-proposal of the rule, which could add years to the regulatory process. While agencies could overrule an OIRA determination that a rule or a cost-benefit analysis was inadequate, such a step would render the regulation highly susceptible to court challenge. It would make industry attempts to overturn new rules in court almost inevitable. The increased risk of court reversal will discourage independent financial agencies from finalizing any regulation that receives a negative OIRA review.” [AFR pdf] (emphasis added)

In short, what we have here is a bill that simply refuses to die… and one which is unnecessary, unwarranted, and merely serves to benefit the financialists who don’t want oversight of their speculation in the Wall Street Casino.

Perhaps we might initiate newly elected Nevada Senator Dean Heller’s in-box with a few e-mails indicating that this is not a bill which deserves the support of 99.9% of the American public?

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Filed under conservatism, Economy, financial regulation, income inequality, income tax, tax revenue, Taxation